Collection period for receivablesContemporary Media Sign Company sells on account. Recentl...

Collection period for receivables

Contemporary Media Sign Company sells on account. Recently, Contemporary reported the following figures:

Requirements

1. Compute Contemporary’s average collection period on receivables during 2012.

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2. Suppose Contemporary’s normal credit terms for a sale on account are “2/10, net 30.” How well does Contemporary’s collection period compare to the company’s credit terms? Is this good or bad for Contemporary?